Old Line Bancshares, Inc. Reports Organic Loan Growth of 7.58% for the Quarter Ended June 30, 2018 in Addition to the Completion of the Acquisition of Bay Bancorp, Inc.

250 Days ago

BOWIE, Md., July 24, 2018 (GLOBE NEWSWIRE) -- Old Line Bancshares, Inc. (“Old Line Bancshares” or the “Company”) (Nasdaq:OLBK), the parent company of Old Line Bank (the “Bank”), reports net income available to common stockholders decreased $1.2 million, or 31.33%, to $2.7 million for the three months ended June 30, 2018, compared to $4.0 million for the three month period ended June 30, 2017. Earnings were $0.17 per basic and diluted common share for the three months ended June 30, 2018, compared to $0.36 per basic and diluted common share for the three months ended June 30, 2017. The decrease in net income for the second quarter of 2018 as compared to the same 2017 period is primarily the result of an increase of $11.1 million in non-interest expense, offsetting the increases of $9.1 million in net interest income and $1.2 million in non-interest income. Net income included $7.1 million ($6.2 million net of taxes) in merger-related expenses (or $0.38 per basic and $0.37 per diluted common share) in connection with the Company’s acquisition of Bay Bancorp, Inc. (“BYBK”), the former parent company of Bay Bank, FSB (“Bay”), in April 2018.

Excluding the merger-related expenses, adjusted operating earnings, which is a non-GAAP financial measure, for the three months ended June 30, 2018 would have been $8.9 million, or $0.55 per basic and $0.54 per diluted common share, a 124.09% increase over the three month period ended June 30, 2017.

Our efficiency ratio stood at 79.55% for the three months ended June 30, 2018. Exclusive of the merger-related expenses, the adjusted efficiency ratio (a non-GAAP financial measure) improved to 52.67% for the three months ended June 30, 2018 compared to 61.11% for the same three month period last year.

Net income available to common stockholders was $8.8 million for the six months ended June 30, 2018, compared to $7.9 million for the same period last year, an increase of $848 thousand, or 10.67%. Earnings were $0.61 per basic and $0.60 per diluted common share for the six months ended June 30, 2018, compared to $0.73 per basic and $0.71 per diluted common share for the same period last year. The increase in net income is primarily the result of increases of $12.6 million, or 44.26%, in net interest income and $1.1 million in non-interest income, partially offset by a $12.6 million increase in non-interest expenses. Included in net income for the 2018 period was $7.1 million ($6.2 million net of taxes, or $0.43 per basic and $0.42 per diluted common share) for merger-related expenses associated with the acquisition of BYBK as discussed above.

Excluding the merger-related expenses, adjusted operating earnings (which is a non-GAAP financial measure) for the six months ended June 30, 2018 would have been $15.0 million or $1.04 per basic and $1.02 per diluted common share, a 88.34% increase over the six month period ended June 30, 2017.

Our efficiency ratio stood at 69.76% for the six months ended June 30, 2018. Exclusive of the merger-related expenses, the adjusted efficiency ratio (a non-GAAP financial measure) improved to 54.26% for the six months ended June 30, 2018 compared to 60.32% for the same six month period last year.

Net interest income increased during each of the three and six month periods ended June 30, 2018 compared to the same periods last year primarily as a result of increases in interest income and fees on loans driven by an increase in net loans held for investment, partially offset by increases in interest expense. Non-interest expense increased in both periods compared to 2017 primarily due to $7.1 million in merger-related expenses, as noted above, but additionally, salaries and benefits and occupancy expense increased as a result of the additional staff and the new branches that we acquired upon our acquisitions of DCB Bancshares, Inc. (“DCBB”), the former parent company of Damascus Community Bank (“DCB”), in July 2017 and BYBK in April 2018.

As of June 30, 2018, the Company had total assets of approximately $2.9 billion, net loans of approximately $2.3 billion and deposits of approximately $2.2 billion.

Net loans held for investment at June 30, 2018 increased $651.5 million, or 38.40%, compared to December 31, 2017 and $591.2 million, or 33.66%, compared to March 31, 2018. Net loans held for investment includes loans that were acquired in the BYBK acquisition of approximately $507 million at June 30, 2018. Organic loan growth during the three and six months ended June 30, 2018 was approximately $108.7 million, or 7.58%, and $188.5 million, or 13.92%, respectively.

James W. Cornelsen, President and Chief Executive Officer of Old Line Bancshares, stated: “We are pleased to report the BYBK merger was successful and with the dedication and teamwork of personnel of Old Line Bank and the former BYBK, the two core processing systems were merged on June 1, 2018. As anticipated, merger and acquisition expenses we incurred during the second quarter due to the BYBK acquisition negatively impacted our second quarter and six month earnings. We had an outstanding second quarter with an organic increase in gross loans of $108.7 million or 7.58%. We believe the Company is positioned well for future growth.”

HIGHLIGHTS:

The merger with BYBK became effective on April 13, 2018, resulting in total assets of $2.9 billion at June 30, 2018.

Net loans held for investment increased $591.2 million and $651.5 million, respectively, during the three and six month periods ended June 30, 2018, to $2.3 billion at June 30, 2018 from $1.7 billion at December 31, 2017 and $1.8 billion at March 31, 2018.

Average gross loans increased $821.6 million, or 57.06%, and $581.3 million, or 41.19%, respectively, during the three and six month periods ended June 30, 2018, to $2.3 billion and $2.0 billion, respectively, during the three and six months ended June 30, 2018, from $1.4 billion during each of the three and six months ended June 30, 2017.

Nonperforming assets increased slightly to 0.19% of total assets compared to 0.18% at December 31, 2017.

The net interest margin during the three months ended June 30, 2018 was 3.80% compared to 3.60% for the same period in 2017. Total yield on interest earning assets increased to 4.58% for the three months ended June 30, 2018, compared to 4.28% for the same period last year. Interest expense as a percentage of total interest-bearing liabilities was 1.08% for the three months ended June 30, 2018 compared to 0.90% for the same period of 2017.

The net interest margin during the six months ended June 30, 2018 was 3.78% compared to 3.66% for the same period in 2017. Total yield on interest earning assets increased to 4.55% for the six months ended June 30, 2018, compared to 4.32% for the same period last year. Interest expense as a percentage of total interest-bearing liabilities was 1.06% for the six months ended June 30, 2018 compared to 0.86% for the same period of 2017.

Return on average assets (“ROAA”) and return on average equity (“ROAE”) were 0.39% and 3.13%, respectively, for the three months ended June 30, 2018, compared to ROAA and ROAE of 0.89% and 9.37%, respectively, for the three months ended June 30, 2017. Excluding the merger-related expenses (non-GAAP), ROAA and ROAE would have been 1.28% and 10.22%, respectively, for the second quarter of 2018.

ROAA and ROAE were 0.72% and 6.27%, respectively, for the six months ended June 30, 2018, compared to ROAA and ROAE of 0.91% and 9.50%, respectively, for the six months ended June 30, 2017. Excluding the merger-related expenses (non-GAAP), ROAA and ROAE would have been 1.23% and 10.65%, respectively, for the six months ended June 30, 2018.

The non-GAAP efficiency ratio was 52.67% and 54.26%, respectively, for the three and six months ended June 30, 2018 compared to 61.11% and 60.32% for the same periods of 2017.

Total assets increased $827.8 million, or 39.31%, since December 31, 2017.

Total deposits grew by $554.8 million, or 33.56%, since December 31, 2017. The BYBK acquisition provided approximately $541.4 million in deposits while new organic deposits were approximately $13.4 million for the six months ended June 30, 2018.

We ended the second quarter of 2018 with a book value of $20.93 per common share and a tangible book value of $14.39 per common share compared to $16.61 and $14.10, respectively, at December 31, 2017.

We maintained appropriate levels of liquidity and by all regulatory measures remained “well capitalized.”

Total assets at June 30, 2018 increased $827.8 million from December 31, 2017 primarily due to increases of $651.5 million in loans held for investment, $69.3 million in goodwill, $31.3 million in cash and cash equivalents, and $29.6 million in loans held for sale. This increase includes assets of approximately $662.5 million at June 30, 2018 that we acquired in the BYBK merger.

Average interest earning assets increased $850.9 million for the three month period ended June 30, 2018 compared to the same period of 2017. The average yield on such assets was 4.58% for the three months ended June 30, 2018 compared to 4.28% for the comparable 2017 period. The increase in the average yield is primarily the result of higher yields on our investment securities available for sale and on our loans held for investment. Average interest bearing liabilities increased $558.8 million for the three month period ended June 30, 2018 compared to the same period of 2017, primarily as a result of the liabilities we acquired in the BYBK acquisition. The average rate paid on such liabilities increased to 1.08% for the three month period ended June 30, 2018 compared to 0.90% for the same period in 2017 due to higher rates paid on both interest bearing deposits and borrowings.

Average interest earning assets increased $602.3 million for the six month period ended June 30, 2018 compared to the same period of 2017. The average yield on such assets was 4.55% for the six months ended June 30, 2018 compared to 4.32% for the comparable 2017 period. The increase in the yield on interest earning assets is the result of a higher yield on our investment portfolio and our loans held for investment. Average interest-bearing liabilities increased $388.3 million for the six month period ended June 30, 2018 compared to the same period of 2017. The average rate paid on such liabilities increased to 1.06% for the six month period ended June 30, 2018 compared to 0.86% for the same period in 2017, due to higher rates paid on both interest earning deposits and borrowings.

The net interest margin for the three months ended June 30, 2018 increased to 3.80% from 3.60% during the second quarter of 2017. The net interest margin for the six months ended June 30, 2018 increased to 3.78% from 3.66% during the same period last year. The net interest margin increased during both periods due to an improvement in asset yields in addition to an increase in non-interest bearing deposits as a source of funding, partially offset by the increase in interest expense, primarily due to the interest paid on our borrowed funds. The net interest margin during 2018 was also affected by the amount of accretion on acquired loans. Accretion increased due to a higher amount of early payoffs on acquired loans with credit marks during the three and six months ended June 30, 2018 compared to the same periods of 2017. The fair value accretion/amortization is recorded on pay-downs recognized during the periods, which contributed 18 and 13 basis points, respectively, for the three and six months ended June 30, 2018 compared to eight basis points for each of the three and six months ended June 30, 2017.

Net interest income increased $9.1 million, or 63.54%, and $12.6 million, or 44.26%, respectively, for the three and six month periods ended June 30, 2018 compared to the same periods of 2017, primarily due to increases in loan interest income resulting from increases in both the average balance of and yields on loans, partially offset by an increase in interest expense. Interest expense increased due to increases in the both the average balance of and average interest rates on our deposits and borrowings.

The provision for loan losses increased $253 thousand and $208 thousand, respectively, for the three and six month periods ended June 30, 2018 compared to the same periods of 2017 due to the organic growth in the loan portfolio.

Non-interest income increased $1.2 million, or 59.75%, for the three month period ended June 30, 2018 compared to the same period of 2017, primarily as a result of income of $674 thousand from our new point of sale (“POS”) sponsorship program and increases of $441 thousand in other fees and commissions and $289 thousand in service charges on deposit accounts, partially offset by a decrease of $215 thousand in income on marketable loans. Non-interest income increased $1.1 million, or 29.42%, for the six month period ended June 30, 2018 compared to the same period of 2017, primarily as a result of income of $674 thousand from our new POS sponsorship program and increases of $532 thousand in other fees and commissions and $453 thousand in service charges on deposit accounts, partially offset by a decrease of $427 thousand in income on marketable loans. As a result of the BYBK acquisition, the Bank became a member of the POS network sponsorship program, which allows our customers to access several processing and settlement networks; when our customers use one of such network, the Bank receives a transaction fee from the network. The increases in other fees and commissions are primarily the result of a one-time bonus on our annuity plan during the second quarter and increases in other loan fees. The increases in service charges on deposits accounts are the result of increased income on bank debit cards due to the higher deposit base primarily as a result of the DCBB and BYBK acquisitions. The decreases in income on marketable loans are the result of decreases in the volume of residential mortgage loans that we sold in the secondary market compared to the same periods of 2017.

Non-interest expense increased $11.1 million, or 112.27%, and $12.6 million, or 64.78%, respectively, for the three and six month periods ended June 30, 2018 compared to the same periods of 2017, primarily as a result of increases in merger and integration expense, salaries and benefits, occupancy and equipment, data processing, core deposit amortization and other operating expenses. We incurred $7.1 million in merger and integration expenses during the 2018 periods due to the recent BYBK acquisition compared to no merger and integration expenses during the same periods last year. Salaries and benefits increased $2.2 million and $2.8 million, respectively, primarily as a result of the additional staff, and occupancy and equipment expenses increased $587 thousand and $914 thousand, respectively, primarily as a result of the new branches, that we acquired in the DCBB and BYBK acquisitions. The increases in data processing expenses of $341 thousand during the three month period and $594 thousand during the six month period resulted from additional customer transactions due to growth, a larger customer base on which a fee is assessed, and new and enhanced products that increased the payments to our core processor. Other operating expenses increased during both periods due to operating costs, such as telephone, office supplies, software expense, marketing and advertising, associated with the additional branches and staff. Core deposit amortization increased as a result of the higher premiums resulting from the deposits we acquired in the DCBB and BYBK acquisitions.

Old Line Bancshares is the parent company of Old Line Bank, a Maryland chartered commercial bank headquartered in Bowie, Maryland, approximately 10 miles east of Andrews Air Force Base and 20 miles east of Washington, D.C. The Bank has 37 branches located in its primary market area of the suburban Maryland (Washington, D.C. suburbs, Southern Maryland and Baltimore suburbs) counties of Anne Arundel, Baltimore, Calvert, Carroll, Charles, Harford, Howard, Frederick, Montgomery, Prince George's and St. Mary's, and Baltimore City. It also targets customers throughout the greater Washington, D.C. and Baltimore metropolitan areas.

Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. The Company’s management uses these non-GAAP financial measures, and believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the Company and provide meaningful comparison to its peers. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the Company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.

Old Line Bancshares, Inc. & Subsidiaries

Consolidated Balance Sheets

June 30, 2018

March 31, 2018

December 31, 2017 (1)

September 30, 2017

June 30, 2017

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Cash and due from banks

$

61,684,888

$

85,617,226

$

33,562,652

$

33,063,210

$

25,025,269

Interest bearing accounts

3,845,419

2,687,988

1,354,870

1,017,257

1,136,343

Federal funds sold

928,337

200,366

256,589

383,737

302,970

Total cash and cash equivalents

66,458,644

88,505,580

35,174,111

34,464,204

26,464,582

Investment securities available for sale

209,941,534

210,353,788

218,352,558

213,664,342

198,372,453

Loans held for sale

34,037,532

3,934,086

4,404,294

2,729,060

6,615,208

Loans held for investment, less allowance for loan losses of $6,704,577 and $5,920,586 for June 30, 2018 and December 31, 2017

2,347,821,496

1,756,576,833

1,696,361,431

1,666,505,168

1,446,573,249

Equity securities at cost

14,854,746

7,782,847

8,977,747

7,277,746

9,972,744

Premises and equipment

43,719,013

40,991,968

41,173,810

42,074,857

36,999,988

Accrued interest receivable

7,715,123

5,310,151

5,476,230

4,946,823

4,144,803

Deferred income taxes

10,978,998

8,547,392

7,317,096

7,774,629

7,323,124

Bank owned life insurance

67,062,920

41,849,569

41,612,496

41,360,871

38,025,982

Annuity plan

6,276,320

5,981,809

5,981,809

-

-

Other real estate owned

2,357,947

1,799,598

2,003,998

2,003,998

2,895,893

Goodwill

94,403,635

25,083,675

25,083,675

25,083,675

9,786,357

Core deposit intangible

16,688,635

5,985,657

6,297,970

6,615,238

3,141,162

Other assets

11,059,118

8,008,664

7,396,227

6,738,435

4,001,391

Total assets

$

2,933,375,661

$

2,210,711,617

$

2,105,613,452

$

2,061,239,046

$

1,794,316,936

Deposits

Non-interest bearing

$

603,257,708

$

572,119,981

$

451,803,052

$

436,645,881

$

366,468,569

Interest bearing

1,604,420,214

1,213,584,463

1,201,100,317

1,217,988,749

1,012,960,448

Total deposits

2,207,677,922

1,785,704,444

1,652,903,369

1,654,634,630

1,379,429,017

Short term borrowings

314,676,164

161,477,872

192,611,971

152,179,112

203,781,308

Long term borrowings

38,238,670

38,172,653

38,106,930

38,040,618

37,974,308

Accrued interest payable

1,827,605

1,105,830

1,471,954

867,884

1,340,591

Supplemental executive retirement plan

6,057,063

5,975,159

5,893,255

5,823,391

5,753,527

Income taxes payable

-

4,182,749

2,157,375

864,260

1,357,159

Other liabilities

9,347,528

3,700,120

4,741,412

5,489,031

3,633,602

Total liabilities

2,577,824,952

2,000,318,827

1,897,886,266

1,857,898,926

1,633,269,512

Stockholders' equity

Common stock

169,889

125,667

125,083

124,675

109,561

Additional paid-in capital

294,042,951

149,691,736

148,882,865

148,351,881

107,333,216

Retained earnings

67,601,752

66,573,919

61,054,487

56,198,108

55,032,717

Accumulated other comprehensive loss

(6,263,883

)

(5,998,532

)

(2,335,249

)

(1,334,544

)

(1,428,070

)

Total stockholders' equity

355,550,709

210,392,790

207,727,186

203,340,120

161,047,424

Total liabilities and

stockholders' equity

$

2,933,375,661

$

2,210,711,617

$

2,105,613,452

$

2,061,239,046

$

1,794,316,936

Shares of basic common stock outstanding

16,988,883

12,566,696

12,508,332

12,467,518

10,956,130

(1) Financial information at December 31, 2017 has been derived from audited financial statements.

Old Line Bancshares, Inc. & Subsidiaries

Consolidated Statements of Income

Three Months Ended June 30,2018

Three Months Ended March 31,2018

Three Months Ended December 31,2017

Three Months Ended September 30,2017

Three Months Ended June 30,2017

Six Months Ended June 30,2018

Six Months Ended June 30,2017

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Interest income

Loans, including fees

$

26,448,728

$

19,700,762

$

18,979,170

$

18,022,324

$

15,765,250

$

46,149,490

$

31,130,904

Investment securities and other

1,719,989

1,623,577

1,452,644

1,469,478

1,288,521

3,343,566

2,558,201

Total interest income

28,168,717

21,324,339

20,431,814

19,491,802

17,053,771

49,493,056

33,689,105

Interest expense

Deposits

3,146,235

2,306,733

2,146,390

1,926,590

1,706,993

5,452,968

3,248,051

Borrowed funds

1,714,250

1,334,831

1,057,846

1,092,736

1,094,133

3,049,081

2,027,020

Total interest expense

4,860,485

3,641,564

3,204,236

3,019,326

2,801,126

8,502,049

5,275,071

Net interest income

23,308,232

17,682,775

17,227,578

16,472,476

14,252,645

40,991,007

28,414,034

Provision for loan losses

532,257

394,896

100,000

135,701

278,916

927,153

719,407

Net interest income after provision for loan losses

22,775,975

17,287,879

17,127,578

16,336,775

13,973,729

40,063,854

27,694,627

Non-interest income

Service charges on deposit accounts

722,879

576,584

593,641

542,909

434,272

1,299,463

846,431

POS sponsorship program

673,502

-

-

-

-

673,502

-

Gain on sales or calls of investment securities

-

-

-

-

19,581

-

35,258

Earnings on bank owned life insurance

461,056

292,936

306,355

297,656

282,100

753,992

563,456

Gains (losses) on disposal of assets

-

14,366

(46,400

)

7,469

-

14,366

112,594

Loss on sale of stock

(60,998

)

-

-

-

-

(60,998

)

-

Gain on sale of loans

-

-

-

-

94,714

-

94,714

Income on marketable loans

511,879

418,472

479,588

482,641

726,647

930,351

1,357,577

Other fees and commissions

879,733

492,663

465,697

820,696

438,305

1,372,396

840,323

Total non-interest income

3,188,051

1,795,021

1,798,881

2,151,371

1,995,619

4,983,072

3,850,353

Non-interest expense

Salaries & employee benefits

7,201,335

5,485,450

5,267,469

5,365,890

5,050,635

12,686,785

9,918,166

Occupancy & equipment

2,242,640

1,980,401

1,936,420

1,828,593

1,655,270

4,223,041

3,308,683

Data processing

702,182

609,639

510,073

443,453

361,546

1,311,821

718,194

Merger and integration

7,121,802

-

-

3,985,514

-

7,121,802

-

Core deposit amortization

540,737

312,313

317,268

272,354

181,357

853,050

379,258

(Gains) losses on sales of other real estate owned

41,956

12,516

-

4,100

-

54,472

(17,689

)

OREO expense

27,995

184,994

45,224

200,959

27,634

212,989

55,211

Other operating

3,198,759

2,406,646

2,664,559

2,539,590

2,653,009

5,605,405

5,099,758

Total non-interest expense

21,077,406

10,991,959

10,741,013

14,640,453

9,929,451

32,069,365

19,461,581

Income before income taxes

4,886,620

8,090,941

8,185,446

3,847,693

6,039,897

12,977,561

12,083,399

Income tax expense

2,160,787

2,025,759

2,328,011

1,684,505

2,070,488

4,186,546

4,140,208

Net income available to common stockholders

$

2,725,833

$

6,065,182

$

5,857,435

$

2,163,188

$

3,969,409

$

8,791,015

$

7,943,191

Earnings per basic share

$

0.17

$

0.48

$

0.47

$

0.18

$

0.36

$

0.61

$

0.73

Earnings per diluted share

$

0.17

$

0.48

$

0.46

$

0.18

$

0.36

$

0.60

$

0.71

Adjusted per basic share (non-GAAP)

$

0.55

$

-

$

-

$

0.42

$

-

$

1.04

$

-

Adjusted per diluted share (non-GAAP)

$

0.54

$

-

$

-

$

0.42

$

-

$

1.02

$

-

Dividend per common share

$

0.10

$

0.08

$

0.08

$

0.08

$

0.08

$

0.18

$

0.16

Average number of basic shares

16,249,625

12,544,266

12,483,692

11,969,536

10,951,464

14,407,182

10,938,892

Average number of dilutive shares

16,464,580

12,743,282

12,696,087

12,172,868

11,165,814

14,620,030

11,152,901

Return on Average Assets

0.39

%

1.16

%

1.12

%

0.43

%

0.89

%

0.72

%

0.90

%

Return on Average Equity

3.13

%

11.36

%

11.09

%

4.26

%

9.37

%

6.27

%

9.50

%

Operating Efficiency (1)

79.55

%

56.43

%

56.45

%

78.52

%

61.11

%

69.76

%

60.32

%

(1) Operating efficiency is derived by dividing non-interest expense by the total of net interest income and non-interest income.

RECONCILIATION OF NON-GAAP MEASURES

As the magnitude of merger-related expenses during the periods set forth below distorts the operational results of the Company, we present in the GAAP reconciliation below and in the accompanying text certain performance measures excluding the effect of the merger-related expenses during the three and six month periods ended June 30, 2018. We believe this information is important to enable stockholders and other interested parties to assess the adjusted operational performance of the Company.

Reconciliation of Non-GAAP measures (Unaudited)

Three Months endingJune 30, 2018

Six Months endingJune 30, 2018

Net Income (GAAP)

$

2,725,833

$

8,791,015

Merger-related expenses, net of tax

6,169,365

6,169,365

Operating net income (non-GAAP)

$

8,895,198

$

14,960,380

Net income available to common shareholders

$

2,725,833

$

8,791,015

Merger-related expenses, net of tax

6,169,365

6,169,365

Operating earnings (non-GAAP)

$

8,895,198

$

14,960,380

Earnings per weighted average common shares, basic (GAAP)

$

0.17

$

0.61

Meger-related expenses, net of tax

0.38

0.43

Operating earnings per weighted average common share basic (non GAAP)

$

0.55

$

1.04

Earnings per weighted average common shares, diluted (GAAP)

$

0.17

$

0.60

Meger-related expenses, net of tax

0.37

0.42

Operating earnings per weighted average common share basic (non-GAAP)

$

0.54

$

1.02

Summary Operating Results (non-GAAP)

Noninterest expense (GAAP)

$

21,077,406

$

32,069,365

Merger-related expenses, gross

7,121,802

7,121,802

Operating noninterest expense (non-GAAP)

13,955,604

$

24,947,563

Operating efficiency ratio (non-GAAP)

52.67

%

54.26

%

Operating noninterest expense as a % of average assets

0.50

%

1.01

%

Return on average assets

Net income

$

2,725,833

$

8,791,015

Merger-related expenses, net of tax

6,169,365

6,169,365

Operating net income (non-GAAP)

$

8,895,198

$

14,960,380

Adjusted Return of Average Assets

Return on average assets (GAAP)

0.39

0.72

Effect to adjust for merger-related expenses, net of tax

0.89

0.51

Adjusted return on average assets

1.28

%

1.23

%

Return on average common equity

Net income available to common shareholders

$

2,725,833

$

8,791,015

Merger-related expenses, net of tax

6,169,365

6,169,365

Operating earnings (non-GAAP)

$

8,895,198

$

14,960,380

Adjusted Return on Average Equity

Return on Average Equity (GAAP)

3.13

6.26

Effect to adjust for merger-related expenses, net of tax

7.09

4.39

Adjusted return on average common equity (non-GAAP)

10.22

%

10.65

%

Old Line Bancshares, Inc. & Subsidiaries

Average Balances, Interest and Yields

6/30/2018

3/31/2018

12/31/2017

9/30/2017

6/30/2017

AverageBalance

Yield/ Rate

AverageBalance

Yield/ Rate

AverageBalance

Yield/ Rate

AverageBalance

Yield/ Rate

AverageBalance

Yield/ Rate

Assets:

Int. Bearing Deposits

$

8,795,004

1.53

%

$

2,003,369

1.47

%

$

1,751,234

1.30

%

$

2,388,171

1.25

%

$

1,474,693

1.19

%

Investment Securities(2)

235,854,989

3.19

%

229,456,764

3.15

%

225,504,844

3.04

%

223,733,565

3.07

%

213,284,562

2.88

%

Loans

2,261,479,332

4.72

%

1,720,721,476

4.69

%

1,674,725,155

4.56

%

1,600,429,497

4.54

%

1,439,841,120

4.47

%

Allowance for Loan Losses

(6,363,239

)

(5,973,556

)

(5,893,906

)

(5,956,956

)

(5,780,277

)

Total Loans

Net of allowance

2,255,116,093

4.74

%

1,714,747,920

4.70

%

1,668,831,249

4.58

%

1,594,472,541

4.56

%

1,434,060,843

4.49

%

Total interest-earning assets

2,499,766,086

4.58

%

1,946,208,053

4.52

%

1,896,087,327

4.39

%

1,820,594,277

4.37

%

1,648,820,098

4.28

%

Noninterest bearing cash

47,014,071

36,844,268

36,504,676

38,671,275

29,113,718

Goodwill and Intangibles

100,901,255

31,272,865

31,587,482

26,317,526

13,045,098

Premises and Equipment

43,592,991

41,088,624

41,956,286

40,923,913

37,054,746

Other Assets

98,152,802

69,837,318

63,412,181

67,286,798

62,896,269

Total Assets

$

2,789,427,205

$

2,125,251,128

$

2,069,547,952

$

1,993,793,789

$

1,790,929,929

Liabilities and Stockholders' Equity

Interest-bearing Deposits

$

1,522,249,880

0.83

%

$

1,200,931,980

0.78

%

$

1,209,362,167

0.70

%

$

1,142,438,456

0.67

%

$

1,010,826,579

0.68

%

Borrowed Funds

288,666,185

2.38

%

235,924,800

2.29

%

186,472,353

2.25

%

207,268,687

2.09

%

241,256,198

1.82

%

Total interest-bearing liabilities

1,810,916,065

1.08

%

1,436,856,780

1.03

%

1,395,834,520

0.91

%

1,349,707,143

0.89

%

1,252,082,777

0.90

%

Noninterest bearing deposits

615,780,315

457,850,993

450,655,820

430,325,956

357,709,853

2,426,696,380

1,894,707,773

1,846,490,340

1,780,033,099

1,609,792,630

Other Liabilities

13,536,574

13,931,983

13,450,844

12,465,862

11,261,452

Stockholder's Equity

349,194,251

216,611,372

209,606,768

201,294,828

169,875,847

Total Liabilities and Stockholder's Equity

$

2,789,427,205

$

2,125,251,128

$

2,069,547,952

$

1,993,793,789

$

1,790,929,929

Net interest spread

3.50

%

3.49

%

3.48

%

3.48

%

3.38

%

Net interest income and

Net interest margin(1)

$

23,659,244

3.80

%

$

18,033,758

3.76

%

$

17,793,020

3.72

%

$

17,025,836

3.71

%

$

14,783,859

3.60

%

(1)

Interest revenue is presented on a fully taxable equivalent (FTE) basis. The FTE basis adjusts for the tax favored status of these types of assets. Management believes providing this information on a FTE basis provides investors with a more accurate picture of our net interest spread and net interest income and we believe it to be the preferred industry measurement of these calculations.

(2)

Available for sale investment securities are presented at amortized cost.

The accretion of the fair value adjustments resulted in a positive impact in the yield on loans for the three months ended June 30, 2018 and 2017. Fair value accretion for the current quarter and prior four quarters are as follows:

6/30/2018

3/31/2018

12/31/2017

9/30/2017

6/30/2017

Fair Value Accretion Dollars

% Impact on Net Interest Margin

Fair Value Accretion Dollars

% Impact on Net Interest Margin

Fair Value Accretion Dollars

% Impact on Net Interest Margin

Fair Value Accretion Dollars

% Impact on Net Interest Margin

Fair Value Accretion Dollars

% Impact on Net Interest Margin

Commercial loans (1)

$

209,819

0.03

%

$

47,705

0.01

%

$

43,318

0.01

%

$

28,420

0.01

%

$

(6,028

)

(0.00

)

%

Mortgage loans (1)

752,461

0.12

78,188

0.02

(10,675

)

(0.00

)

159,941

0.03

302,687

0.07

Consumer loans

126,575

0.02

97,544

0.02

106,269

0.02

57,514

0.01

5,038

0.00

Interest bearing deposits

70,178

0.01

80,886

0.02

95,755

0.02

88,766

0.02

29,538

0.01

Total Fair Value Accretion

$

1,159,033

0.18

%

$

304,323

0.07

%

$

234,667

0.05

%

$

334,641

0.07

%

$

331,235

0.08

%

(1) Negative accretion on commercial and mortgage loans is due to the early payoff of loans which caused a reduction in fair value income on acquired loan portfolio.

Below is a reconciliation of the fully tax equivalent adjustments and the GAAP basis information presented in this release:

6/30/2018

3/31/2018

12/31/2017

9/30/2017

6/30/2017

Net Interest Income

Yield

Net Interest Income

Yield

Net Interest Income

Yield

Net Interest Income

Yield

Net Interest Income

Yield

GAAP net interest income

$

23,308,232

3.74

%

$

17,682,775

3.68

%

$

17,227,578

3.60

%

$

16,472,476

3.59

%

$

14,252,645

3.47

%

Tax equivalent adjustment

Federal funds sold

80

0.00

36

0.00

31

0.00

177

0.00

25

0.00

Investment securities

161,340

0.03

160,911

0.04

275,685

0.06

267,376

0.06

245,539

0.06

Loans

189,592

0.03

190,036

0.04

289,726

0.06

285,807

0.06

285,650

0.07

Total tax equivalent adjustment

351,012

0.06

350,983

0.08

565,442

0.12

553,360

0.12

531,214

0.13

Tax equivalent interest yield

$

23,659,244

3.80

%

$

18,033,758

3.76

%

$

17,793,020

3.72

%

$

17,025,836

3.71

%

$

14,783,859

3.60

%

Old Line Bancshares, Inc. & Subsidiaries

Selected Loan Information

(Dollars in thousands)

June 30, 2018

March 31, 2018

December 31, 2017

September 30, 2017

June 30, 2017

Legacy Loans(1)

Period end loan balance

$

1,543,113

$

1,434,375

$

1,354,573

$

1,304,530

$

1,285,819

Deferred costs

2,364

2,374

2,013

1,807

1,679

Accruing

1,542,371

1,433,907

1,352,407

1,299,139

1,279,091

Non-accrual

742

468

474

686

659

Accruing 30-89 days past due

4,565

4,587

1,692

4,705

6,050

Accruing 90 or more days past due

178

-

-

-

19

Allowance for loan losses

6,444

6,075

5,739

5,634

5,807

Other real estate owned

-

425

425

425

747

Net charge offs (recoveries)

(3

)

(2

)

(2

)

198

(21

)

Acquired Loans(2)

Period end loan balance

$

809,049

$

326,085

$

345,696

$

365,984

$

164,986

Accruing

807,241

324,787

338,914

360,858

160,608

Non-accrual(3)

1,808

1,298

1,291

1,214

1,237

Accruing 30-89 days past due

13,770

4,932

5,375

3,900

3,138

Accruing 90 or more days past due

361

330

116

107

3

Allowance for loan losses

260

182

182

182

105

Other real estate owned

2,358

1,375

1,579

1,579

2,149

Net charge offs (recoveries)

88

60

(2

)

33

(2

)

Allowance for loan losses as % of held for investment loans

0.29

%

0.36

%

0.35

%

0.35

%

0.41

%

Allowance for loan losses as % of legacy held for investment loans

0.43

%

0.42

%

0.42

%

0.43

%

0.45

%

Allowance for loan losses as % of acquired held for investment loans

0.03

%

0.06

%

0.05

%

0.05

%

0.06

%

Total non-performing loans as a % of held for investment loans

0.13

%

0.12

%

0.11

%

0.12

%

0.13

%

Total non-performing assets as a % of total assets

0.19

%

0.18

%

0.18

%

0.19

%

0.27

%

(1)

Legacy loans represent total loans excluding loans acquired on April 1, 2011, May 10, 2013, December 4, 2015, July 28, 2017 and April 13, 2018.

(2)

Acquired loans represent all loans acquired on April 1, 2011 from Maryland Bank & Trust Company, N.A., on May 10, 2013 from The Washington Savings Bank, on December 4, 2015, from Regal Bank & Trust, on July 28, 2017 from DCB, and on April 13, 2018 from Bay. We originally recorded these loans at fair value upon acquisition.

(3)

These loans are loans that are considered non-accrual because they are not paying in conformance with the original contractual agreement.

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